Judgment: 1. The only ground in this appeal, preferred by the assessee, Sukh Ram Dass Telu Ram, Mandi Dabwali, is in respect of the addition of Rs. 33,750 made by the 1TO and confirmed by the Commissioner (Appeals). The assessment year involved is 1977-78 for which the relevant 'previous year' ended on 31-3-1977.

2. The assessee had claimed a loss of Rs. 22,925 in cotton (rui) account and there were four transactions in the said account, details of which are tabulated as under :--------------------------------------------------------------------------------Sl. Qty.

Suresh Kumar 23,269.7924-11-1976 Sri Ganesh 1,18,035.00 (Loss) -do- Traders 11,657.9623-12-1976 Jindal Cotton 76,503.69 1,782.31 -do- & Gen. Mills (Profit) In the course of assessment proceedings, the first item was treated by the ITO as ready business and profit of Rs. 9,284.55 on that account was subjected to tax, whereas Item Nos. 2, 3 and 4 were considered as speculative business and the net result of the said transactions being loss of Rs. 33,146 (Rs. 23,269.79 loss + Rs. 11,657.96 loss-Rs. 1,782.31 profit) was ignored and the said loss was not allowed as per unnumbered para 2 of his order.

3. When the issue was carried by the assessee before the Commissioner (Appeals), he observed that it is not the addition of Rs. 32,750 as taken in the grounds of appeal by the assessee but Rs. 33,146 and upheld the said addition as per paras 1 and 2 of his order.

4. It is this action of the Commissioner (Appeals) which is contested by the assessee before us. The learned counsel for the assessee, Shri D.S. Gupta, at the outset submitted that what is to be seen is whether the three transactions considered to be of speculative nature by the revenue, are hit by Section 43(5) of the Income-tax Act, 1961 ('the Act'). He submitted that under the Indian Income-tax Act, 1922 ('the 1922 Act'), it is Explanation 2 to Section 24(1) vis-a-vis in the 1961 Act it is Section 43(5) (sic). He submitted that when the two provisions are put to comparison there is a minor change but a very significant change. He submitted that in the 1922 Act the expression used is 'purchase and sale' whereas in Section 43(5) the expression is 'purchase or sale'. He was fair enough to admit that the Supreme Court decision in the case of Raghunath Prasad Poddar v. CIT [1973] 90 ITR 140 which could well support the contention of the assessee, had been overruled by the Supreme Court itself in the case of Davenport & Co.

(P.) Ltd. v. CIT [1975] 100 ITR 715. But he vehemently argued that the said two decisions were under the 1922 Act and in the light of the change effected in Section 43(5) putting word 'or' instead of the word 'and' in Explanation 2 to Section 24(1) of the 1922 Act, the asses-see is on a very strong pedestal. He submitted that in the present case, none of the transactions is either of purchase alone or of sale alone which was settled at any time and in any way other than by actual delivery and, therefore, is not hit by Section 43(5). He also submitted that forward business and forward transactions are two different things. He submitted that this is a case where settlement has not been made but payments are made by cheques. He also drew our attention to the Madhya Pradesh High Court judgment in the case of CIT v.Bhikamchand Jankilal [1981] 131 ITR 554 in support of his contention.

5. The learned departmental representative, Shri R.S. Khichi, on the other hand, submitted that the omission of the word 'and' and its replacement by the word 'or' will not make any difference, when Explanation 2 to Section 24(1) of the 1922 Act and Section 43(5) of the 1961 Act are compared. Besides, relying on the orders of the two lower authorities, he submitted that there was no delivery in the transactions under consideration and in the light of the Supreme Court judgment in the case of Davenport & Co. (supra), the order of the Commissioner (Appeals) deserves to be confirmed.

6. After taking into consideration the rival submissions, we are unable to interfere with the finding of the Commissioner (Appeals). Before we deal with the thin distinction of 'and' in Explanation 2 to Section 24(1) of the 1922 Act and 'or' in Section 43(5) we would like to mention that all the three transactions are tripartite. The assessee entered into a forward transaction to purchase from Atma Ram Suresh Kumar in the first case and entered into a forward transaction of sale to Gupta Cotton. In the second case the assessee entered into a forward transaction of purchase from Ganesh Traders and forward transaction of sale to Chiranji Lal Madan Lal. In the third case, the assessee entered into forward transaction of purchase with Jindal Cotton & General Mills and forward transaction of sale in respect of the same with Chiranji Lal Madan Lal. But there is no dispute about the fact that the assessee neither took delivery from the persons from whom it purchased nor effected delivery to those to whom it sold. The Supreme Court decision in the case of Raghunath Prasad (supra) could squarely support the assessee's contention because in that case, their Lordships held : ... that to effect a valid transfer of any commodity it was not necessary that the transfer in question should be followed up by actual delivery of the goods to the transferee. Even if the goods were delivered to the transferee's transferee the first transfer would also be a valid transfer and would not be a speculative transaction. In these cases one had to see whether the ultimate purchaser of the pucca delivery orders had taken actual delivery of the goods sold. The Tribunal and the High Court were wrong in holding that if any transfer of the pucca delivery orders was not followed by actual delivery of the goods to the immediate transferee that transaction had to be considered speculative for the purpose of Section 24(1). (p. 140) But the above said decision in a later judgment, in the case of Davenport & Co. (supra) by the Supreme Court itself, came to be overruled and in that case, their Lordships held as under : The words 'actual delivery' in Explanation 2 to Section 24(1) mean real as opposed to notional delivery. Whether a transaction is speculative in the general sense or under the Contract Act is not relevant for the purpose of this Explanation. The definition of 'delivery' in Section 2(2) of the Sale of Goods Act which has been held to include both actual and constructive or symbolical delivery has no bearing on the definition of speculative transaction in the Explanation. A transaction which is otherwise speculative would not be a speculative transaction within the meaning of Explanation 2 if actual delivery of the commodity or the scrips has taken place ; on the other hand, a transaction which is not otherwise speculative in nature may yet be speculative according to Explanation 2 if there is no actual delivery of the commodity or the scrips. The Explanation does not invalidate speculative transactions which are otherwise legal but gives a special meaning to that expression for purposes of income-tax only. (p. 716) It is clear from the above-said decision of the Supreme Court that its earlier decision in the case of Raghunath Prasad (supra) has been overruled.

7. Now what we have to consider is the change pointed out in Explanation 2 to Section 24(1) of the 1922 Act and Section 43(5) of the 1961 Act. In the 1922 Act, Section 24 deals with set off of loss in computing the aggregate income of an assessee. Sub-section (1) of Section 24 reads as under : (1) Where any assessee sustains a loss of profits or gains in any year under any of the heads mentioned in Section 6, he shall be entitled to have the amount of the loss set off against his income, profits or gains under any other head in that year : Provided that in computing the profits and gains chargeable under the head 'Profits and gains of business, profession or vocation', any loss sustained in speculative transactions which are in the nature of a business shall not be taken into account except to the extent of the amount of profits and gains, if any, in any other business consisting of speculative transactions : ** ** ** ** Explanation 1 : Where the speculative transactions carried on are of such a nature as to constitute a business, the business shall be deemed to be distinct and separate from any other business.

Explanation 2 : A speculative transaction means a transaction in which a contract for purchase and sale of any commodity including stocks and shares is periodically or ultimately settled otherwise than by the actual delivery or transfer of the commodity or scrips.

(5) 'speculative transaction' means a transaction in which a contract for the purchase or sale of any commodity, including stocks and shares, is periodically or ultimately settled otherwise than by the actual delivery or transfer of the commodity or scrips : From a reading of the two provisions it is absolutely clear that they are identical with the only difference that the word 'and' in the 1922 Act is replaced by the word 'or' in the 1961 Act. To our mind, this change has enlarged the powers of the revenue authorities even to rope in a transaction which is either in respect of purchase or in respect of sale, whereas under the 1922 Act it had to be both purchase and sale. The mainspring in both the sections is actual delivery, which neither the assessee took as purchaser, nor made as seller and in the light of the Supreme Court decision in the case of Davenport & Co.

(supra), the order of the Commissioner (Appeals) deserves to be confirmed.

8. In the commentary of Kanga and Palkhivala, the learned authors while dealing with the two cases of Raghunath Prasad (supra) and Davenport & Co. (supra) made the following observation : The Supreme Court held in Raghunath Poddar v. CIT [1973] 90 ITR 140 that where A, having bought goods from B and having got a delivery order, sells them to C, and does not take physical delivery himself but according to trade custom passes on the delivery order to C who takes actual delivery from B, A himself must be regarded as having taken actual delivery and he cannot be held to have entered into a speculative transaction. The Supreme Court overruled this decision in Davenport & Co. Ltd. v. CIT [1975] 100 ITR 715. It is submitted that the latter case was wrongly decided. The concept of 'actual delivery' both under the general law and in this section was correctly laid down in Raghunath Poddar's case. (p. 537) 8A. But for us, the above observation is of no value when the Supreme Court decision is there and it cannot be ignored.

9. The case of Bhikamchand Jankilal (supra) to which our attention was drawn, has no relevance for the issue under consideration.

10. In the light of the above discussion and for the reasons given by the Commissioner (Appeals) in his order, the same is confirmed and, in the result, the appeal is dismissed.